FriendTech rugged this past week. A little over a year ago, FriendTech was the hottest app in the decentralized ecosystem, and it even attracted mainstream attention.

However, within a year of its launch, FriendTech experienced a sharp decline in user engagement and financial value, ultimately leading the development team to abandon the project.

What the hell happened?

The Launch and Initial Success

FriendTech was a social financial (SocialFi) platform that rapidly gained attention in the crypto world, launching in August 2023 on Base, Coinbase's Layer 2 solution for Ethereum. It built upon the foundation laid by previous social platforms, such as BitClout, offering users the ability to tokenize their social interactions. 

Users could buy shares or "keys" from influencers and other prominent figures, with each share’s price determined by an automated bonding curve that increased exponentially as more shares were bought. This mechanism allowed early adopters to profit from the increasing popularity of certain individuals while influencers themselves earned a portion of the fees generated from the trading of their shares.

Key Features and Innovations

• Progressive Web App (PWA) Technology: FriendTech utilized PWA technology, allowing users to access the platform through web browsers on mobile devices without the need for a traditional app store download. This approach bypassed potential regulatory hurdles and the "Apple tax" associated with iOS app distribution.

• Embedded Wallet Integration: The platform integrated with Privy, an embedded wallet solution that allowed users to create self-hosted wallets through Google or Apple ID logins. This significantly lowered the barrier to entry for non-crypto native users by eliminating the need for separate wallet downloads and mnemonic phrase management.

• Bonding Curve Mechanism: FriendTech implemented a bonding curve pricing model for keys, where the price of each influencer's keys increased exponentially with supply. This created a natural market dynamic and incentivized early adoption.

Growth Phase

Friend quickly became the flagship app of the Base network, riding on the hype of decentralized technology, airdrop expectations, and speculative mania. The launch coincided with growing interest in Layer 2 solutions, especially Base.

The involvement of Paradigm, a major venture capital firm with a history of backing successful crypto projects, also added significant credibility to the platform. Paradigm’s seed funding round for FriendTech helped bolster its reputation, attracting institutional attention and speculative investors alike. This funding, combined with the platform’s viral nature and the FOMO surrounding airdrop rumors, created a perfect storm of hype.

Following its launch, FriendTech experienced explosive growth in several key metrics:

Signs of Trouble

Despite its initial success, cracks in FriendTech’s foundation began to appear within weeks of its launch. The platform struggled to retain users and deliver meaningful value beyond short-term profits.

Unsustainable User Growth

FriendTech’s growth model relied heavily on continuous inflows of new users. The platform’s bonding curve meant that prices would continue to rise as more users bought shares, but as user acquisition began to slow in September, prices started to plateau and, in many cases, decline. 

This created a rush for the exits, as users who had bought in at higher prices began selling their shares to lock in whatever profits remained. The resulting price volatility undermined confidence in the platform, leading to a sharp drop in trading activity.

Airdrop Backfires 

The airdrop rumors that had initially driven so much activity turned out to be a double-edged sword. Once the official airdrop occurred in May 2024, many users who had been holding onto their shares in anticipation of rewards quickly sold their holdings, causing prices to plummet. 

The FRIEND token, which had debuted at $3, rapidly fell to $0.08 within a few months. 

After that, FriendTech v2 airdrop, which featured non-transferable POINTS tokens, also got a massive backlash within the crypto community. 

Non-transferable tokens mean that recipients won’t be able to sell or exchange them freely, except to whitelisted addresses. This forces users to pay a 1.5% platform fee when selling through approved channels. 

Many in the community were frustrated, arguing that it undermined the principles of decentralization. While the non-transferable feature could prevent immediate sell-offs and stabilize the token’s value post-airdrop, it has been criticized for limiting user control.

Product Stagnation 

While FriendTech had succeeded in capturing attention with its initial product offering, the platform failed to evolve meaningfully beyond its basic functionality. Despite the release of V2  in May 2024, which introduced "Clubs" as a new feature, the platform’s core mechanics remained unchanged. 

This lack of innovation made it difficult to retain users, especially in an environment where competitors like Farcaster and Lens Protocol were continuously improving and adding new features. 

As users grew bored with FriendTech’s limited functionality, many began abandoning the platform in favor of more dynamic alternatives. Or they just started memeing it to hell 👇

Base Fallout

FriendTech's development team, led by the anonymous founder Racer, had a very public fallout with Base, further alienating users and investors. In an X post, Racer wrote:

"Farcaster investors went apeshit smearing us when we launched because they misunderstood what we were doing. Pushed it really hard on their team and users and the relationship has been downhill since then with us getting ostracized from anything that is for the 'Base community'."

The team then decided to "migrate" from Base to its own chain, FriendChain, which was met with skepticism from the community.

Exit of Key Players 

One of the most significant blows to FriendTech’s credibility came when Paradigm, the VC firm that had initially backed the project, exited ahead of the FRIEND token launch. Paradigm declined its allocation in the token, signaling to the market that even its most prominent backers had lost faith in the platform’s future. 

The Decline Phase

By late 2023, FriendTech's growth had stalled, and various metrics began to show signs of decline:

The Death Blow: Developer Abandonment

By mid-2024, FriendTech was on life support. Daily active users had dropped to less than 100, and trading volumes were a fraction of what they had been during the platform’s peak. Despite attempts to revive interest through product updates and new features, the platform could not regain its former momentum.

On September 8, 2024, the FriendTech development team made a fateful decision. The team announced that they had transferred control of the platform’s smart contracts to a burn address, effectively locking the system and preventing any future changes to its fees or functionality. This move, widely interpreted as the developers abandoning the project, was the final nail in FriendTech’s coffin.

By relinquishing control of the platform, the developers ensured that no further development or updates would be possible. While the platform’s web client remained operational, the lack of active development and the disintegration of the user base meant that FriendTech was effectively dead.

Lessons from FriendTech's Fall

This sudden rise and fall has a lot of valuable lessons for other projects looking to build in web3.

Over-Reliance on Speculation

From the beginning, FriendTech’s user base was built largely on speculative traders looking to profit from short-term price movements and airdrop rewards. While this strategy generated massive activity in the early days, it proved unsustainable once the airdrop had been distributed and the speculative bubble burst. 

The lack of long-term utility beyond speculation meant that once the speculative fervor subsided, there was little reason for users to remain on the platform. Unlike platforms that cultivate genuine user engagement or create meaningful utility, FriendTech was primarily a venue for short-term trading, and its failure to transition beyond this initial phase sealed its fate.

Future projects should prioritize sustainable growth by focusing on genuine user engagement, community building, and long-term utility rather than short-term profits.

Innovative Tokenomics Are a Double-Edged Sword

While the bonding curve mechanism was an innovative way to price assets on FriendTech, it also introduced major volatility. For tokenomics to be successful, they need to balance incentivizing early adopters while ensuring that later entrants are not disproportionately disadvantaged. Platforms that rely on speculative tokenomics must be cautious of the inevitable crash that follows unchecked price appreciation.

Early adopters who bought shares at low prices were able to cash out at significant profits, but later entrants often found themselves holding rapidly depreciating assets. This volatility discouraged new users from joining the platform and made it difficult to build long-term confidence in the product.

Continuous Innovation

FriendTech’s lack of significant innovation after its initial launch played a crucial role in its downfall. As mentioned before, the V2 introduced the idea of “Clubs” – rooms tied to topics rather than individual creators. This idea completely flopped. Nobody wanted to be members of paywalled chatrooms. Stagnation is fatal, especially in web3 where competitors are constantly evolving.

Community Trust and Transparency Are Critical 

One of the most damaging aspects of FriendTech’s collapse was the erosion of trust between the development team and the user base. Poor communication, mismanagement of expectations (especially around the airdrop), and a lack of transparency all contributed to the platform’s downfall. In decentralized ecosystems, where users are often stakeholders, maintaining open lines of communication and being transparent about project challenges and decisions are crucial for sustaining community trust.

Backing by Prominent VCs Isn’t a Guarantee of Success

While VC backing can provide a project with initial credibility and funding, it does not guarantee long-term success. Paradigm’s involvement gave FriendTech a major boost, but once the firm exited, the platform quickly lost momentum. Projects need to stand on their own merits and deliver value to users beyond the hype generated by institutional investments.

In Closing

FriendTech’s rise and fall serve as a cautionary tale. The project’s collapse highlights the importance of building sustainable growth models, maintaining community trust, and offering long-term value to users. 

In the end, FriendTech’s story is a reminder that hype alone cannot sustain a platform. Without a solid foundation of utility, innovation, and trust, even the most promising projects can quickly fade into obscurity.